What is the primary purpose of insurance?
A) To eliminate risk
B) To reduce financial uncertainty and make accidental loss manageable
C) To increase profits
D) To provide investment opportunities
Answer: B) To reduce financial uncertainty and make accidental loss manageable
Which principle of insurance means that the insured can only be compensated for the actual loss and cannot make a profit from a claim?
A) Indemnity
B) Subrogation
C) Insurable Interest
D) Utmost Good Faith
Answer: A) Indemnity
What is the term for the amount paid periodically by the insured to the insurer for covering risk?
A) Claim
B) Premium
C) Deductible
D) Policy limit
Answer: B) Premium
Which type of insurance provides payment to the policyholder in the event of a covered life event, such as death or disability?
A) Property Insurance
B) Liability Insurance
C) Life Insurance
D) Health Insurance
Answer: C) Life Insurance
What is the process called when an insurer seeks reimbursement from a third party who is responsible for a loss?
A) Indemnification
B) Subrogation
C) Underwriting
D) Reinsurance
Answer: B) Subrogation
What is the term for the initial amount that must be paid by the insured before an insurance company will pay a claim?
A) Premium
B) Deductible
C) Copayment
D) Policy limit
Answer: B) Deductible
Which type of risk can be mitigated through diversification?
A) Systematic Risk
B) Unsystematic Risk
C) Speculative Risk
D) Pure Risk
Answer: B) Unsystematic Risk
What is the term for a risk management technique that involves purchasing insurance to transfer the risk to another party?
A) Risk Avoidance
B) Risk Retention
C) Risk Transfer
D) Risk Reduction
Answer: C) Risk Transfer
Which insurance principle requires that the insured has a financial interest in the subject of the insurance policy?
A) Utmost Good Faith
B) Proximate Cause
C) Insurable Interest
D) Indemnity
Answer: C) Insurable Interest
What type of insurance protects businesses from losses due to events that may occur during the normal course of business?
A) Life Insurance
B) Liability Insurance
C) Property Insurance
D) Business Interruption Insurance
Answer: D) Business Interruption Insurance
Which risk management technique involves taking actions to reduce the severity or frequency of losses?
A) Risk Avoidance
B) Risk Retention
C) Risk Reduction
D) Risk Transfer
Answer: C) Risk Reduction
What is the term for a legally binding contract between an insurer and an insured?
A) Premium
B) Deductible
C) Policy
D) Claim
Answer: C) Policy
What is the main role of an underwriter in an insurance company?
A) To sell insurance policies
B) To manage claims
C) To assess risk and determine premiums
D) To handle customer service inquiries
Answer: C) To assess risk and determine premiums
Which type of insurance protects against damages to another person’s property or bodily injury in an accident?
A) Health Insurance
B) Liability Insurance
C) Property Insurance
D) Life Insurance
Answer: B) Liability Insurance
What is the term for the maximum amount an insurer will pay for a covered loss?
A) Premium
B) Deductible
C) Policy limit
D) Copayment
Answer: C) Policy limit
What type of insurance covers the risk of financial loss from death, severe injury, or illness?
A) Liability Insurance
B) Health Insurance
C) Life Insurance
D) Property Insurance
Answer: C) Life Insurance
What is the principle that ensures that insurers and insureds must act in good faith and disclose all relevant information?
A) Indemnity
B) Subrogation
C) Utmost Good Faith
D) Insurable Interest
Answer: C) Utmost Good Faith
Which term describes a risk management strategy where the risk is intentionally retained by the business or individual?
A) Risk Avoidance
B) Risk Retention
C) Risk Transfer
D) Risk Reduction
Answer: B) Risk Retention
What is the main purpose of reinsurance?
A) To increase premiums
B) To sell more policies
C) To spread risk among multiple insurers
D) To reduce deductibles
Answer: C) To spread risk among multiple insurers
Which type of risk is inherent and cannot be eliminated but can only be managed or transferred?
A) Pure Risk
B) Speculative Risk
C) Systematic Risk
D) Unsystematic Risk
Answer: C) Systematic Risk
What is the term for an insurer’s evaluation of an applicant’s risk profile to determine the appropriate premium and coverage?
A) Indemnification
B) Underwriting
C) Subrogation
D) Actuarial Analysis
Answer: B) Underwriting
What type of insurance covers losses due to theft, fire, or natural disasters?
A) Liability Insurance
B) Property Insurance
C) Health Insurance
D) Life Insurance
Answer: B) Property Insurance
Which term refers to the individual or entity covered by an insurance policy?
A) Insurer
B) Underwriter
C) Policyholder
D) Agent
Answer: C) Policyholder
What type of insurance provides compensation to employees who suffer work-related injuries or illnesses?
A) Life Insurance
B) Liability Insurance
C) Health Insurance
D) Workers’ Compensation Insurance
Answer: D) Workers’ Compensation Insurance
Which type of risk involves the possibility of loss or no loss but no possibility of gain?
A) Pure Risk
B) Speculative Risk
C) Systematic Risk
D) Unsystematic Risk
Answer: A) Pure Risk
What is the term for the periodic review of an insurance policy to ensure it continues to meet the policyholder’s needs?
A) Policy Evaluation
B) Underwriting
C) Policy Renewal
D) Claim Adjustment
Answer: C) Policy Renewal
Which insurance principle ensures that the insured is put back in the same financial position after a loss as they were before the loss?
A) Utmost Good Faith
B) Subrogation
C) Indemnity
D) Insurable Interest
Answer: C) Indemnity
What type of insurance covers legal costs and damages if the policyholder is sued for negligence or malpractice?
A) Life Insurance
B) Liability Insurance
C) Property Insurance
D) Health Insurance
Answer: B) Liability Insurance
What is the term for an insurance policy that provides coverage for a specific period?
A) Term Policy
B) Whole Life Policy
C) Endowment Policy
D) Annuity
Answer: A) Term Policy
Which risk management strategy involves not engaging in activities that are known to carry risk?
A) Risk Retention
B) Risk Avoidance
C) Risk Transfer
D) Risk Reduction
Answer: B) Risk Avoidance
What is the role of an insurance broker?
A) To assess risk and determine premiums
B) To manage claims
C) To act as an intermediary between the insurer and the insured
D) To provide investment advice
Answer: C) To act as an intermediary between the insurer and the insured
What type of insurance covers medical expenses incurred by the policyholder?
A) Life Insurance
B) Liability Insurance
C) Health Insurance
D) Property Insurance
Answer: C) Health Insurance
Which principle of insurance allows the insurer to take legal action against a third party responsible for a loss to recover the amount paid to the insured?
A) Indemnity
B) Subrogation
C) Utmost Good Faith
D) Insurable Interest
Answer: B) Subrogation
What is the term for the analysis and evaluation of potential risks that could negatively impact an organization?
A) Risk Management
B) Underwriting
C) Actuarial Analysis
D) Policy Evaluation
Answer: A) Risk Management
Which type of insurance is designed to cover a specific event, such as a wedding or concert?
A) Term Insurance
B) Event Insurance
C) Liability Insurance
D) Property Insurance
Answer: B) Event Insurance
What is the term for the entity that provides insurance coverage?
A) Policyholder
B) Underwriter
C) Insurer
D) Agent
Answer: C) Insurer
Which insurance principle requires full disclosure of all material facts related to the risk being insured?
A) Indemnity
B) Subrogation
C) Utmost Good Faith
D) Insurable Interest
Answer: C) Utmost Good Faith
What type of insurance provides financial protection against claims resulting from injuries and damage to people and property?
A) Life Insurance
B) Liability Insurance
C) Health Insurance
D) Property Insurance
Answer: B) Liability Insurance
What is the term for an insurance policy that pays out a sum of money either on the death of the insured person or after a set period?
A) Term Insurance
B) Whole Life Insurance
C) Endowment Policy
D) Annuity
Answer: C) Endowment Policy
Which risk management strategy involves accepting the risk when the cost of insuring against it is greater than the potential loss?
A) Risk Transfer
B) Risk Reduction
C) Risk Avoidance
D) Risk Retention
Answer: D) Risk Retention
Who is responsible for determining the premium and coverage terms for a new insurance policy?
A) Policyholder
B) Underwriter
C) Claims Adjuster
D) Broker
Answer: B) Underwriter
What type of insurance policy is designed to protect a company’s directors and officers from personal losses due to litigation against them?
A) Professional Liability Insurance
B) General Liability Insurance
C) Directors and Officers (D&O) Insurance
D) Business Interruption Insurance
Answer: C) Directors and Officers (D&O) Insurance
Which term describes the maximum period during which an insurance company will pay benefits to the insured?
A) Policy Term
B) Grace Period
C) Benefit Period
D) Elimination Period
Answer: C) Benefit Period
What is the main goal of actuarial analysis in insurance?
A) To sell insurance policies
B) To handle customer claims
C) To evaluate financial risks and determine premiums
D) To manage investment portfolios
Answer: C) To evaluate financial risks and determine premiums
What type of insurance provides income replacement if the policyholder becomes unable to work due to illness or injury?
A) Life Insurance
B) Health Insurance
C) Disability Insurance
D) Liability Insurance
Answer: C) Disability Insurance
Which term refers to the insurance coverage of a specific type of risk for a specific period?
A) Blanket Policy
B) Term Insurance
C) Liability Insurance
D) Specialized Policy
Answer: B) Term Insurance
What is the term for the amount an insurer charges to provide coverage, based on the risk profile of the insured?
A) Deductible
B) Premium
C) Copayment
D) Claim
Answer: B) Premium
What type of risk involves the possibility of both gain and loss?
A) Pure Risk
B) Speculative Risk
C) Systematic Risk
D) Unsystematic Risk
Answer: B) Speculative Risk
Which insurance principle ensures that the insured cannot recover more than the actual loss from an insurance claim?
A) Insurable Interest
B) Utmost Good Faith
C) Indemnity
D) Subrogation
Answer: C) Indemnity
What type of insurance provides coverage for damage or loss of a policyholder’s home and possessions?
A) Health Insurance
B) Life Insurance
C) Homeowners Insurance
D) Liability Insurance
Answer: C) Homeowners Insurance